Melco Drives Slump on Manufacturing Data: China OvernightYe Xie
Chinese stocks listed in the U.S. tumbled to the lowest in three weeks, led by Melco Crown Entertainment Ltd. and China Unicom Hong Kong Ltd., as a report showed manufacturing in the world’s second-largest economy contracted for the first time in seven months.
The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. slid 1.3 percent to 92.64 in New York, the lowest since May 3. Casino operator Melco Crown declined to a one-month low and China Unicom, the nation’s second-largest mobile-phone company, sank the most since January. Shanda Games Ltd. surged as its mobile game revenue jumped in the first quarter.
Global stocks fell as a preliminary reading of 49.6 for a Purchasing Managers’ Index released yesterday by HSBC Holdings Plc and Markit Economics was below a 50.4 median estimate in a Bloomberg News survey. The data adds to evidence that China’s economic growth is losing steam for a second quarter. Chinese Premier Li Keqiang signaled last week that policy makers are reluctant to use stimulus to counter the slowdown as they focus on market reforms.
“We are cautious, but not panicking,” said Elena Ogram, who holds Chinese stocks in her $50 million portfolio of emerging-market assets at Bank Bellevue AG, said by phone from Zurich yesterday. “The economy is not accelerating. It’s the new reality. There’s transformation taking place. It takes time to do what they have to do.”
Ogram favors consumer stocks and companies from sectors that may benefit from the reforms, such as health care.
The iShares FTSE China 25 Index Fund, the largest Chinese exchange-traded fund in the U.S., lost 1 percent in New York to $37.18, the lowest since April 26. The Standard & Poor’s 500 Index slipped 0.3 percent to 1,650.51, on speculation the Federal Reserve may reduce monetary stimulus.
American depositary receipts of Melco Crown, which operates casinos in Macau, fell 4.7 percent to $23.26. The number of Japanese visitors to Macau slumped 25 percent in a year through April as the yen dropped, according to data compiled by Bloomberg Industries.
The ADRs traded at 3.7 percent below their equivalent shares in Hong Kong, the deepest discount since February.
China Unicom’s ADRs declined 4.5 percent, the biggest drop in four months, to $14.08. They traded at a 1 percent discount to their Hong Kong shares, the most since February.
Economic data earlier this month showed that fixed-asset investment and factory production missed forecasts, after growth unexpectedly slowed to 7.7 percent in the first quarter, from
7.9 percent the previous period. Premier Li said on a May 13 speech that relying on government-led investment for growth “is not only difficult to sustain but also creates new problems and risks.”
Shanda Games, China’s third-largest web games operator, surged 16 percent, the most since March 2011, to $3.61.
The Shanghai-based company reported first-quarter earnings of 16 cents per share, matching the median forecast of three analysts surveyed by Bloomberg. Revenue from the mobile game business increased to 106.5 million yuan ($17 million), from zero a year earlier, and accounted for about 10 percent of the company’s total sales, it said in a statement.
“The bright spot is on the mobile gaming side,” said Andy Yeung, an analyst at Oppenheimer & Co., in a phone interview from New York. “It shows significant contribution to the revenue. Everyone is interested in the mobile business space. People will take comfort that they are making good progress.”
Semiconductor Manufacturing International Corp., a Shanghai-based computer chip foundry, rose 4.7 percent, the most in two weeks, to $4.20, after BNP Paribas SA started its coverage on the company with a buy recommendation.
Sohu.com Inc., a provider of news, games and video based in Beijing, fell 1 percent to $63.81. The company’s negotiation with PPTV.com to buy the Chinese video website has stalled because of a disagreement on price, Guangzhou-based Xinkuai newspaper reported. PPTV is looking for other potential buyers, the newspaper said.
The Shanghai Composite Index fell 1.1 percent to 2,275.67 at the close, the biggest loss since April 23. The Hang Seng China Enterprises Index of Chinese stocks traded in Hong Kong fell 2.8 percent, the most since April 5, to 10746.70.